Shareholders cheer Pandora’s plan to add some sparkle
By Stine Jacobsen - Feb 6th, 13:32
Investors have welcomed a new strategy from jewellery maker Pandora, which is struggling to regain its competitive edge in a weak retail market, sending its shares up more than 10%.
The Danish charm-bracelet maker, currently looking for a new CEO, has been challenged by a fall in the number of shoppers visiting malls in its main markets, while new jewellery lines have failed to entice shoppers. It cut its 2018 sales outlook twice in consecutive quarters last year.
Pandora said it will target annual cost savings of 1.2-billion Danish kroner ($184m) and push marketing efforts to try re-ignite interest, from women in particular. It expects up to 2.5-billion kroner in restructuring costs during this year and 2020.
“We can clearly see that our brand could be sharper and more focused,” CFO Anders Boyer said. “Our marketing has not provided the juice needed to drive positive, like-for-like growth.” Pandora will launch a new concept for both its physical and online stores, to give customers a new “look and feel”, Boyer said.
Pandora has been leaderless since ousting Anders Colding Friis following a first profit warning in August last year. Former Body Shop CEO Jeremy Schwartz and recently appointed CFO Boyer are running the business for now.
Shares in Pandora rose 12% at 9am GMT, trading at 320 kroner, which is still a far cry from its 2016 peak of 1,000 kroner.
“The strategic review focuses on cost savings, improved brand positioning, reducing promotions, inventory buy-back and new ways of working, all of which are the right steps in our view,” said RBC analyst Piral Dadhania. However, the firm will have to execute against a challenging retail backdrop, which might make it difficult to achieve, Dadhania warned.
Sales this year will fall 3% to 7%, hit by a decision to reduce promotional activities, the company said. “The level of promotions have been too high the past couple of years, so we reduce this now and it will hit our sales, but we will come back at a lower but more solid level,” Boyer said.
Pandora had enjoyed dramatic sales growth over the past decade as its customisable bracelets and charms became hugely popular, but would not return to double-digit growth, Boyer said.
The company has already announced that it will cut 397 of its 27,000 employees to streamline operations and to protect profitability. More than half of the job losses will be in Thailand.
Pandora’s 2019 earnings before interest and taxes margin is seen at 26% to 28%, excluding restructuring costs of up to 1.5-billion kroner.
Fourth-quarter earnings before interest, tax, depreciation and amortisation (ebitda) fell almost 8% from the same period the previous year to 2.8-billion Danish kroner, but above the 2.5-billion expected by analysts in a Reuters poll.
The firm also proposed to buy back 2.2-billion kroner worth of shares in 2019 and said dividends would remain at the same level as in 2018. Business Live
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